The Rise of Subscription-based Software

The Rise of Subscription-based Software

With the rise of subscription services, owning media and software is becoming a thing of the past. We’ve watched as companies have used the subscription model to capture market share from entrenched incumbents at both the consumer and business level. Today we’ll take a look at a few services that are encroaching upon ground normally dominated by large enterprises.

About six years ago I was working as a vendor at Microsoft. I managed a group of technicians who traveled around the world supporting large conferences, trade-shows and product launches. Keeping track of details across many events was a challenge, and those details needed to get to the right people at the right times.

The ubiquitous Microsoft Office was the tool of choice at the time, but I figured there must be a better way than sending around attachments via email to dozens of event managers. Collaborating on documents and tracking changes was an exercise in frustration, so I began to research other options.

Google Docs included the features I needed most. It wasn’t as powerful as Office, but it didn’t need to be. It made sharing and collaborating easy, even amongst a larger group of event managers. That I had introduced a Google product into a mix of mostly Microsoft employees went basically unnoticed.

Google Docs is perfect for creating simple charts

Subscription services such as Hulu, Netflix and Spotify attract a lot of attention. Sure, this is often because they are well funded, but also because they have attacked the old guards of cable and recording industry, creating instant access while lowering prices.

The chore of managing physical media, and moving that media to devices like tablets and iPods, is anachronistic. I currently own over 1000 CDs that now sit in a box since I discovered Spotify two years ago. Netflix is now used more than DirecTV at our home. I don’t recall the last time anyone used the DVD player on our Xbox to watch a movie either.

Dropbox is another subscription-based service for file management and sharing. With it, my children can save and share their homework with their teachers, instead of carrying a thumb-drive around or printing assignments.

Spotify recently announced it has 10 million paid subscribers

Although the consumer-focused subscription services garner a lot of attention for being accessible to individual consumers, they have been no less influential to businesses. I recently spoke with the owner of a construction company who uses a product called Sage 300. For years he’d paid close to $2000 per user, an exorbitant amount to provide the seats to all his employees. He was thrilled to move to a newer subscription model which let him license the software to two dozen employees for about the same price as he was paying for only a few seats the year before.

This same owner had also ditched his onsite file server for Box, a storage site similar to Dropbox but with a business focus on encryption and advanced administrative controls. Moving much of his business to the cloud had also reduced his IT costs. Time will tell if he made the right decision, but so far it’s a no-brainer.

Adobe is another company that’s adapted its product offering around a subscription model with their popular Creative Cloud. This is welcome news for small design firms that used to purchase Adobe products such as Photoshop, InDesign and Premiere individually or part of the Creative Suite, costing nearly $3000 per user. Creative Cloud now offers companies, individuals, and students a much more affordable and predictable subscription service to nearly all Adobe products for a monthly or annual fee. Although this has irked some longtime professional users, Adobe has made it clear this is the direction they are headed. And it’s hard to blame Adobe given that Photoshop has been the most pirated piece of software for many years.

It’s clear that subscription services are here to stay. It’s unlikely they will entirely replace the old licensing models, but some professionals and companies will want to own their software, much like some people still want to own a DVD, but they will surely increase the number of tools available to employees. This is largely due to lower per user and maintenance costs.

The BYOD movement also allows individuals to select those tools that best fit their work instead of relying on traditional IT procurement options. It’s like a tech salad bar, but hopefully without the stray hairs from strangers and warm lettuce. Look for areas where software costs and IT involvement is high and you might be onto the next business that’s prepared to be disrupted by a subscription-based model.

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